CHAPTER 4
Accrual Accounting Concepts
PROBLEM 4-1C
(a)
2. Unearned Service Revenue ……………………………. 11,000
Service Revenue ………………………………………. 11,000
3. Cash ……………………………………………………………… 40,000
Unearned Service Revenue ……………………….. 40,000
4. Accounts Receivable …………………………………….. 138,000
5. Cash ……………………………………………………………… 126,000
(b) Cash received with respect to fees:
3. Gift certificates …………………………………………. 40,000
5. Partial collection of fees receivable …………… 126,000
Accounts Receivable
Bal. 18,000
4. 138,000
1. 18,000
5. 126,000
Bal. 12,000
Service Revenue
4. 138,000
Bal. 172,000
Unearned Service Revenue
Bal. 11,000
Bal. 17,000
Cash
PROBLEM 4-2C
(a)
Date
Account Titles
Debit
Credit
1.
2014
May 31
Supplies Expense …………………………………
Supplies ………………………………………..
750
750
2.
31
Utilities Expense …………………………………..
Accounts Payable ………………………….
260
260
3.
31
Prepaid Insurance
($3,600 ÷ 24 months) …………………..
150
Insurance Expense ……………………………….
150
4.
31
Unearned Service Revenue ……………………
Service Revenue ($4,000 – $1,500) ……
2,500
2,500
5.
31
Salaries and Wages Payable
[(4/5 X $600) X 2 employees] ……….
960
Salaries and Wages Expense …………………
960
6.
31
Equipment ………………………………….
200
Depreciation Expense …………………………...
200
7.
31
Accounts Receivable …………………………….
Service Revenue …………………………….
1,980
1,980
(b)
Cash
5/31 Bal. 7,500
5/31 Bal. 3,000
5/31 Bal. 4,980
5/31 Bal. 2,500
5/31 750
5/31 Bal. 1,750
Prepaid Insurance
5/31 Bal. 3,600
5/31 150
5/31 Bal. 3,450
PROBLEM 4-2C (Continued)
Equipment
5/31 Bal. 12,000
5/31 200
5/31 Bal. 200
5/31 200
5/31 Bal. 200
Accumulated Depreciation—
Accounts Payable
5/31 Bal. 3,500
5/31 260
5/31 Bal. 3,760
5/31 960
5/31 Bal. 960
5/31 2,500
5/31 Bal. 4,000
5/31 Bal. 1,500
5/31 750
5/31 Bal. 750
Common Stock
5/31 Bal. 19,100
Service Revenue
5/31 Bal. 11,980
5/31 Bal. 7,500
Rent Expense
5/31 Bal. 1,500
Depreciation Expense
Insurance Expense
5/31 150
5/31 Bal. 150
Utilities Expense
5/31 260
5/31 Bal. 260
PROBLEM 4-2C (Continued)
(c) QUINN CONSULTING
Adjusted Trial Balance
May 31, 2014
Debit
Credit
Cash ……………………………………………………………
Accounts Receivable …………………………..……….
Accumulated Depreciation—
Equipment ……………………………………………….
Accounts Payable ………………………………………..
Salaries and Wages Payable …………………………
$ 7,500
4,980
$ 200
3,760
960
PROBLEM 4-3C
(a) 1. Aug. 31 Insurance Expense ($450 X 3) ……………. 1,350
Prepaid Insurance ……………………… 1,350
3. 31 Depreciation Expense ……………………….. 2,650
Accum. Depr.—Buildings
5. 31 Salaries and Wages Expense …………….. 600
Salaries and Wages Payable ………. 600
7. 31 Interest Expense ………………………………. 900
Interest Payable
[($120,000 X 9%) X 1/12] ………….. 900
(b)
Cash
8/31 Bal. 24,600
8/31 1,600
8/31 Bal. 1,600
8/31 Bal. 4,050
8/31 Bal. 4,300
8/31 3,600
8/31 Bal. 700
Prepaid Insurance
8/31 Bal. 5,400
8/31 1,350
PROBLEM 4-3C (Continued)
Land
8/31 Bal. 40,000
Buildings
8/31 Bal. 132,000
8/31 1,650
8/31 Bal. 1,650
8/31 Bal. 120,000
8/31 Bal. 100,000
8/31 Bal. 36,000
8/31 1,000
8/31 Bal. 1,000
8/31 Bal. 6,500
8/31 Bal. 86,600
Accumulated Depreciation—
Unearned Rent Revenue
8/31 5,000
8/31 Bal. 6,800
8/31 Bal. 1,800
8/31 Bal. 600
8/31 Bal. 9,400
8/31 Bal. 3,600
Interest Payable
8/31 900
8/31 Bal. 900
8/31 Bal. 5,000
Rent Revenue
8/31 600
8/31 Bal. 53,600
PROBLEM 4-3C (Continued)
Insurance Expense
8/31 1,350
8/31 Bal. 1,350
8/31 3,600
8/31 Bal. 3,600
8/31 Bal. 2,650
8/31 900
8/31 Bal. 900
Depreciation Expense
8/31 2,650
PROBLEM 4-3C (Continued)
(c) MAQUOKETA VALLEY RESORT
Adjusted Trial Balance
August 31, 2014
Debit
Credit
Cash ……………………………………………………………
Accumulated Depreciation—Buildings ………….
Equipment …………………………………………………..
Accumulated Depreciation—Equipment ………..
Accounts Payable ………………………………………..
Unearned Rent Revenue ………………………………
Salaries and Wages Payable …………………………
Interest Payable …………………………………………..
Mortgage Payable ………………………………………..
Common Stock …………………………..………………..
$ 24,600
36,000
$ 1,650
1,000
6,500
1,800
600
900
120,000
100,000
PROBLEM 4-3C (Continued)
(d) MAQUOKETA VALLEY RESORT
Income Statement
For the Three Months Ended August 31, 2014
Revenues
Rent revenue ………………………………………….. $86,600
Expenses
Salaries and wages expense …………………… $53,600
Utilities expense …………………………………….. 9,400
MAQUOKETA VALLEY RESORT
Retained Earnings Statement
For the Three Months Ended August 31, 2014
Retained earnings, June 1 ……………………………… $ 0
Add: Net income …………………………………………. 11,500
PROBLEM 4-3C (Continued)
MAQUOKETA VALLEY RESORT
Balance Sheet
August 31, 2014
Assets
Current assets
Cash …………………………………… $ 24,600
Accounts receivable ……………. 1,600
Land …………………………………… 40,000
Buildings …………………………….. $132,000
Less: Accum. depr. bldgs. ….. 1,650 130,350
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable …………………………..…….. $ 6,500
Unearned rent revenue ………………………….. 1,800
Stockholders’ equity
Common stock ……………………………………… 100,000
(e) The following accounts would be closed: